FX.co ★ The copper review for 05/10/2010

The copper futures reached 26-month high amid huge investors purchases. Nevertheless, further price hike may result in the demand lowering on this metal from the final consumers. By the end of the deals on
COMEX the copper futures with December delivery closed on the upside by 6.25 cents or by 1.7% by 3.7265 dollar/pound that comes as the highest mark from July 2008. The copper prices rose by 35% from the June lows amid the demand uptrend and fears concerning the global deliveries.
An unrest about the "currency wars" starting also supported the market, as the investors were striving at restricting the currency risk by means of metal purchasing. The currency investment becomes dangerous, as the governments are trying to decrease the national currencies rates.

The Bank of Japan decision to reduce the interest rate to 0-0,1% and introduce new measures of economic stimulation reminded the market that such situation may repeat with the US FRS. In this case, taking similar measures by the FRS will lead to the inflation boosting. That is why the investors were buying the metals, as they are considered as sanctuary currencies which ease the inflationary risks.
Nevertheless, according to the market participants, there was lack of consumer purchases due to high prices. Amid this 90% of the trading volume of Tuesday fell on big funds.
It can lead to a sharp correction of copper prices in a short term.